Trump Economic Policies

Donald John Trump will be the next President of the United States, a result almost no one would have thought possible at any time during a tumultuous and dramatic election season.  Why he won will be the subject of debate for years to come.  That he took down not only the Clinton but also the Bush political dynasties is something not quite yet appreciated by the general public.  President-Elect Trump represented change at a time when the electorates in western democracies have had it with the old order.  However, the sun came up the morning after the election and the stock market has liked the results.  As of this writing, The S&P 500 has tacked on a nearly 5% gain since the lows on November 4th.  It has also rallied six of the last seven trading days, although this may have as much to do with Republicans now controlling all branches of the Federal Government than just Mr. Trump winning the Presidency.

What The Election Results May Mean For Your Portfolio

Regardless of whether your preferred candidate won, you are probably curious and maybe a bit nervous about how a Trump presidency will affect the economy and your portfolio. While we can’t predict the future, here are some thoughts on what might happen.

There are multiple factors to take into consideration when trying to determine what will happen to markets going forward. In general, markets hate uncertainty.  The election results are removing that from some sectors in the markets.  Financials, industrials and certain areas of the healthcare sector have seen a substantial rally since the results have come in under the belief that regulatory burdens may be diminished and the US may be on the verge of a large infrastructure spend in the coming years.

While no one can be sure which policies will be enacted once Trump takes office, based on his campaign promises, here are some broad overview considerations for how a Trump presidency could affect the economy:

Taxes

Trump has vowed to slash taxes for top earners and corporations, which could boost consumer spending and attract more foreign investment. However, tax revenues are expected to fall $6.2 trillion over the next decade, according to the Tax Policy Center.  Some of this amount may be reduced if tax code revision occurs.  That legislation would potentially include provisions allowing US corporations to bring home nearly $3 trillion dollars of profits earned by them overseas but subject to much higher tax rates here at home. 

Government Spending

During the election, Trump promised to spend heavily on programs that would create jobs in construction, and steel manufacturing. He said his focus would be on transportation, water, telecom and energy. This spending could create jobs and boost consumer spending.

Debt

Economists have feared that Trump's spending stimulus and tax cuts would increase the national debt by $5 to 10 trillion or more, according to a report by the Committee for a Responsible Federal Budget. Trump has countered that a growing economy would mitigate the deficit. Experts disagree over whether the overall results will be positive or negative.

Trade

During his campaign, Trump promised to increase tariffs on Mexican and Chinese imports, among others. This could increases prices for U.S. consumers and even trigger a breakdown in international trade, which could hurt U.S. exports.  The Chinese in particular have already warned of this potential should a Trump Administration turn too much of a focus their way.

Immigration

According to USA Today, undocumented workers make up about 5% of the labor force. If Trump follows through on his immigration policies, it could potentially make it difficult for U.S. businesses to find certain types of low wage labor.  Thus wages could increase but also bring about an uptick in inflation.

What Should You Do?

While this election season has been volatile and many have resorted to dire predictions and extreme emotions, we expect that the markets will follow historical trends.  Remember that a President may influence markets but he or she cannot control them. There are always other variables involved that play an important role in market success or failure, such as international events, interest rates, consumer prices and corporate earnings. In any case, here are some basic guides in thinking about the months ahead.

It pays to stay focused on the long-term. A wise investor needs to learn to ignore the “trees” and keep their eyes on the “forest,” or the historic long-term market returns. We believe our ETF oriented portfolios and investment strategies are built for the long-term, with short-term uncertainty in mind. While current events, particularly the results of a hard fought presidential race, can be upsetting, there’s no reason to deviate from your long-term financial plan.

We’re Here to Answer Your Questions

When current events bring uncertainty, it helps to have someone that can help you remember to see the bigger picture. An experienced financial professional can help you evaluate the markets and make decisions based on knowledge and understanding instead of media hype. If you would like to review your current investment portfolio or have questions regarding the stock market, please contact our office today.

Now May Be a Good Time to Review Your Other Accounts

While the accounts we manage for you are well diversified, now may be a good time to review your other investments including 401(k)s and other assets to assess risk and determine if any action is warranted.

We’re Here to Help The People You Care About

Your friends and family may be stressed during this market volatility.  If so we are never too busy to talk to someone you care about. We are happy to offer a free second opinion to your friends, family, and coworkers. Please feel free to share this article with them or send them our contact information.

As always, your portfolio should adhere to a long-term strategy. The short-term changes that will result from the election should not impact your long-term plan. If you are worried about your investments, please contact us by calling 708.488.0115 or emailing lumencapital@hotmail.com. We’re happy to hear from you and discuss your concerns.

About Chris

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Christopher R. English is a money manager and the founder of Lumen Capital Management, LLC, a Registered Investment Advisory firm. Specializing in investment management and developing customized portfolios that reflect a client’s values and needs, he has nearly three decades of experience working with individuals, families, businesses, and foundations. Based in the greater Chicago area, he serves clients throughout Illinois, as well as Florida, Massachusetts, California, Indiana, and other states. To schedule a complimentary portfolio review, contact Chris today by calling 708.488.0115 or emailing lumencapital@hotmail.com.